On paper, the Dakota Indian Foundation in Chamberlain has had a good run the past few years. The charity’s most recent tax filings show it raises $1.2 million a year, a nice sum for a small group trying to find money for college scholarships for Native Americans.

But look closer in the 34-page tax filing reveals red flags. The organization falls well short of what experts say charities should spend on their programs. In the case of Dakota Indian Foundation, program services represented 16 percent of its expenditures. The rest was eaten up by fundraising costs and administration expenses.

In contrast, the Make-A-Wish Foundation of South Dakota, which is about the same size, spends 84 percent of its contributions on program expenses.

Last month, the Oregon Department of Justice released a list of its “20 worst charities.” The Dakota Indian Foundation was on the list, and Attorney General Ellen Rosenblum said her office was “committed to ensuring that the few unscrupulous charities aren’t taking advantage of Oregonians’ generosity.”

No law dictates how much charities spend on their stated missions, said Sandra Miniutti, the vice president of marketing for Charity Navigator, a watchdog group. However, most spend at least 75 percent.

For John Beheler, the executive director of Dakota Indian Foundation, the criticism is biting, and he said critics don’t have a full understanding of the organization and its challenges. He was unaware the organization was flagged by the Oregon attorney general.

“That’s not very nice,” he said.

Beheler, who took over the organization in May, said he’s putting together a plan that would reduce the amount of money the foundation spends on fundraising so more goes to scholarships and other services. Last summer, the organization let go a longtime professional fundraising firm based in New Hampshire because Beheler was concerned it took in too much money.

“Hopefully, we can work those numbers a little better,” he said. “We’re doing what we can to try and raise dollars in different ways.”

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Charities are under more scrutiny than ever. Organizations such as GuideStar collect nonprofit tax filings, known as IRS Form 990s, and make them free for anyone with an Internet connection and an interest in a particular organization to review. Before their widespread availability on the Internet, Form 990s were attainable through the mail from the IRS, a time-consuming process, or by visiting a nonprofit directly. The organizations are required to make the filings available for public review.

More methods to assess charities

Understanding the forms requires some knowledge, and watchdog groups have made it even easier for potential donors to evaluate an organization before writing a check. Besides Charity Navigator, the Better Business Bureau and CharityWatch rate organizations based on their tax filings and how efficiently they spend donor dollars.

Charity Navigator’s current rating for Dakota Indian Foundation is zero stars, meaning the organization spends too little of its contributions on its stated mission.

“There seems to be a long track record here of them spending most of their budget on fundraising,” Miniutti said.

There’s a reason for that, said Ron Kjonegaard, who retired as the foundation’s executive director last year after serving there for 18 years.

Foundation trapped by fundraising needs

The foundation was started in 1971 by John F. Lindley, a Chamberlain man who served in the state House of Representatives and then served as lieutenant governor from 1959 to 1961. Lindley hoped the foundation would help Native Americans in South Dakota afford higher education and preserve their culture. Lindley died shortly after the foundation was incorporated.

Fundraising on its own since 1993

For many years, the foundation worked with the St. Joseph’s Indian School in Chamberlain on mailings. The school handled much of the overhead associated with fundraising, Kjonegaard said. But that relationship ended in 1993, and the foundation had to find its own way of raising money.

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Kjonegaard started in 1994. He and a secretary were the only paid staff, and the two were unable to handle million-piece mailings sent to potential contributions. A nine-person board oversees the foundation.

“We had to get a professional fundraiser to help out, and that was spendy,” he said.

That started a pattern.

Daniel Borochoff, the president and founder of CharityWatch, reviewed the foundation’s tax filings.

“It looks like they’re trapped in this cycle, because nobody in their right mind would give them any money when such a small portion actually benefits the Indians,” he said.

Breaking that cycle would be difficult, he added.

The foundation could use a big donor or government grants to help bring down the ratio it spends on fundraising. But big donors probably would be reluctant to give money because so little of what it gets now goes to program services.

Radical options: merge or dissolve

Duplication of services is another matter. CharityWatch gives the Denver-based American Indian College Fund an A-minus rating for the way it manages donations, and Charity Navigator gives it four stars, its highest rating.

Borochoff said the foundation might be better off merging with a charity in a better position, or by dissolving and forming under another name. Ultimately, he said, there is only so much money in the economy available to charities, and too many groups waste it on fundraising.

“That’s money that’s not available to another group that would give most of it to Indians,” he said. “That’s really selfish.”

There is a wide gulf between the Dakota Indian Foundation and the American Indian College Fund. The American Indian College Fund raised $20 million in last year’s filing and spent 74 percent of that on program expenses. Last year, it provided 4,218 students with scholarships that averaged $1,740, said Dina Horwedel, the group’s director of public education.

“The interesting thing to know is that only one in 20 can afford to go (to college) without assistance,” she said. Horwedel added that she had not heard of the Dakota Indian Foundation.

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In contrast, the Dakota Indian Foundation raised $1.2 million and used 16 percent of that on program services. Beheler said the group finances about 70 to 80 scholarships a semester. They are available to sophomores, juniors and seniors, as well as graduate students and are for $1,000. The group gives smaller amounts for cultural activities.

According to tax filings, the foundation has spent $5.5 million on fundraising and another $1.5 million on management expenses the past seven years. During the same period, the group spent $1.6 million on program services.

Mystery foundation to many in S.D.

And although the foundation has been anchored in South Dakota for more than 40 years, it doesn’t have a big reputation here. Janelle Toman, spokeswoman for the South Dakota Board of Regents, said she had not heard of the group, and only one person at the regents had heard of the group.

Nor had Julie Pier, the financial aid director at the University of South Dakota. After checking, she said “a couple” students at USD had scholarships from the foundation.

Jay Larsen, the financial aid director at South Dakota State University, had heard of the organization. He said fewer than 10 students at SDSU were receiving scholarships.

A big help to those who do receive aid

Still, although the organization spends much to raise little, those who have received funding from the Dakota Indian Foundation are grateful In 2000, the group donated $409,000 to the USD Foundation in the name of its founder. The John F. Lindley endowment helps fund the South Dakota Oral History Center at the university. The balance at the end of September had grown to $445,000, said Steve Brown, USD Foundation president.

“It was a very nice and very generous award that was made,” Brown said.

Nicholas Estes, 27, received several $500 scholarships from the foundation from 2004 to 2006 while earning an undergraduate degree in history at USD. He has applied for another scholarship while he works on a doctorate degree on American studies at the University of New Mexico.

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The scholarships paid for textbooks, and he said every bit of assistance helped. Estes, an enrolled member of the Lower Brule Tribe, said Native Americans going to college from the state’s impoverished counties face a daunting challenge of trying to assemble the money for college, and scholarships such as those from the foundation help retain Native students.

“It really helps those students that are coming from lower-income backgrounds,” he said. “A thousand dollars goes a long way, especially in state schools.”

Creating awareness at lower cost

Last week, Beheler was processing scholarship awards for the spring semester. He said he has a plan to keep more of the money for scholarships and cultural grants and less for fundraising. When it got rid of its fundraiser last summer, the group solicited proposals from three other fundraisers and picked one that will take less of the money raised in the foundation’s name, he said.

The foundation is doing more on the Internet, through Facebook and social media. Those mediums don’t require the expenses of sending out solicitations through the mail.

“Our auditors have suggested to us that we need to make a change here, because too many of our dollars are going to postage and printing,” he said.

The foundation also is opening an art gallery, stocked with Indian art it accumulated during the past 15 years. The Dakota Plains Gallery and Gift Shop will be open in time for summer tourist season, and Beheler is hoping to tap another revenue stream.

Kjonegaard, the previous executive director, hopes Beheler can make it happen.